Monsanto, Pharmacia To Merge

David Barboza, New York Times

Published
4:00 am PST, Monday, December 20, 1999

The Monsanto Co., which makes one of the world's best-selling drugs but has come under fire recently over genetically altered crops, and the drugmaker Pharmacia & Upjohn Inc. agreed to merge yesterday in a deal that would create one of the world's largest pharmaceutical and biotechnology companies.

The two companies, which have a combined market value of about $50 billion, plan to combine their growing pharmaceutical operations and leap into the upper echelon of drug companies early next year, with more than $8 billion in worldwide sales.

Their union is an attempt to keep pace in the rapidly consolidating world of drugmakers, where big research and development budgets and worldwide sales and distribution networks are becoming more common.

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The new company, however, will move quickly to shed the agricultural division of Monsanto, which has come under increasing criticism both in the United States and in Europe because of its development of genetically modified crops, which emit their own pesticides and immunize themselves against the use of herbicides but also increase crop yields and hold out the promise of creating more nutritious foods.

The new company plans to create an agricultural subsidiary and then sell about 20 percent of the company to the public in an initial public offering some time next year. The idea is to separate the pharmaceutical and agricultural divisions, partly because of shareholder complaints that the agricultural division had been dragging down the stock price of Monsanto.

An outcry against the genetically modified crops began in Europe earlier this year, and some of the concerns over safety have reached American shores. A week ago, some of the nation's leading antitrust lawyers filed a class-action suit against Monsanto, contending the company rushed the products to market without properly testing them.

The suit also says that Monsanto, which is now the world's second largest seed company, played a central role in a international cartel that fixed the prices of corn and soybean seeds.

Monsanto executives dismissed the suit, which is backed by environmental advocates, as a political stunt meant to heighten consumer fears and whip up hysteria. The company insists that the products have been scientifically proven to be safe and that regulators have approved their introduction in the United States, where more than 70 million acres of corn, soybeans and cotton have been planted.

Now, executives at Monsanto and Pharmacia say, the division of the company will allow shareholders to make a choice.

"We do recognize that we have some public relations issues," said Fred Hassan, the chief executive at Pharmacia & Upjohn, which is based in Peapack, N.J. "But the underlying science and technology is very sound."

The deal, which is a stock swap structured as a merger of equals, was approved by the boards of the two companies over the weekend. It is a union of two companies that have forged very different paths to creating products that seek to improve the health and well-being of consumers.